Markets and the Economics of the Public Sector

Purpose of Assignment 

In Week 2, students will employ the supply and demand model to  develop consumer surplus and producer surplus as a measure of welfare  and market efficiency. Students learn about welfare economics–the study  of how the allocation of resources affects economic well-being–and  will discover that under most circumstances, the equilibrium price and  quantity is also the one that maximizes welfare. Students will review  different sources of externalities and a variety of potential cures and  will see that while markets are usually a good way to organize economic  activity, governments can sometimes improve market outcomes. Students  will see how the U.S. government raises and spends money and the  difficulty of making a tax system both efficient and equitable. 

Assignment Steps 

Scenario: Imagine you have been assigned the responsibility of preparing apresentation for the governor’s next economic conference. 

Prepare a 10-15 slide presentation with detailed speaker notes addressing the following:

• Explain why equilibrium of supply and demand is desirable.
• Explain the following concepts using the concept of consumer and producer surplus:  

  Efficiency of markets
  Costs of taxation
  Benefits of international trade

• Discuss how externalities may prevent market equilibrium and the  various governments policies used to remedy the inefficiencies in  markets caused by externalities.
• Analyze the difference between the efficiency of a tax system and  the equity of a tax system as it refers to the costs imposed on  taxpayers using the benefits principles. 

Cite a minimum of three peer-reviewed sources, not including your textbook. 

Format consistent with APA guidelines.